QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly
period ended June 30, 2018

OR

¨

TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file
number 000-50626

CYCLACEL PHARMACEUTICALS, INC.

(Exact name of registrant
as specified in its charter)

Delaware

91-1707622

(State or Other Jurisdiction
of Incorporation or Organization)

(I.R.S. Employer
Identification No.)

200 Connell
Drive, Suite 1500

Berkeley
Heights, New Jersey

07922

(Address of principal executive offices)

(Zip Code)

Registrant’s
telephone number, including area code: (908) 517-7330

Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required
to submit such files). Yes x No ¨

Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of
“large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2
of the Exchange Act.

Large accelerated filer ¨

Accelerated filer ¨

Non-accelerated filer ¨

Smaller reporting filer x

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨
No x

Indicate by check mark
whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this
chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter):

Emerging growth company ¨

If an emerging growth company, indicate
by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

As of August 9, 2018 there were 11,997,447
shares of the registrant’s common stock outstanding.

Preferred stock, $0.001 par value; 5,000,000 shares
authorized at December 31, 2017 and June 30, 2018; 6% Convertible Exchangeable preferred stock; 335,273 shares issued
and outstanding at December 31, 2017 and June 30, 2018. Aggregate preference in liquidation of $4,006,512
as of December 31, 2017 and June 30, 2018.

-

-

Series A convertible preferred stock; 264 shares issued
and outstanding at December 31, 2017 and June 30, 2018.

-

-

Common stock, $0.001 par value; 100,000,000 shares authorized at December 31,
2017 and June 30, 2018; 11,997,447 shares issued and outstanding at December 31, 2017 and June 30, 2018.

12

12

Additional paid-in capital

365,057

365,123

Accumulated other comprehensive loss

(794

)

(801

)

Accumulated deficit

(342,509

)

(345,710

)

Total stockholders’ equity

21,766

18,624

Total liabilities and stockholders’
equity

$

26,003

$

22,730

The accompanying
notes are an integral part of these consolidated financial statements.

3

CYCLACEL PHARMACEUTICALS, INC.

CONSOLIDATED STATEMENTS
OF OPERATIONS

(In $000s, except
share and per share amounts)

(Unaudited)

Three Months Ended
June 30,

Six Months Ended
June 30,

2017

2018

2017

2018

Revenues:

Total revenues

$

—

$

—

$

—

$

—

Operating expenses:

Research and development

1,222

1,182

2,534

1,980

General and administrative

1,267

1,283

2,648

2,647

Total operating
expenses

2,489

2,465

5,182

4,627

Operating loss

(2,489

)

(2,465

)

(5,182

)

(4,627

)

Other income (expense):

Foreign exchange gains (losses)

16

(39

)

(43

)

(43

)

Interest income

18

84

30

153

Other income, net

-

66

879

632

Total other income (expense)

34

111

866

742

Loss before taxes

(2,455

)

(2,354

)

(4,316

)

(3,885

)

Income tax benefit

268

502

574

684

Net loss

(2,187

)

(1,852

)

(3,742

)

(3,201

)

Dividend on convertible exchangeable
preferred shares

(50

)

(50

)

(100

)

(101

)

Net loss
applicable to common shareholders

$

(2,237

)

$

(1,902

)

$

(3,842

)

$

(3,302

)

Basic and diluted earnings per common
share:

Net loss per share – basic
and diluted

$

(0.50

)

$

(0.16

)

$

(0.88

)

$

(0.28

)

Weighted average common shares outstanding

4,434,441

11,997,447

4,353,333

11,997,447

The accompanying
notes are an integral part of these consolidated financial statements.

4

CYCLACEL PHARMACEUTICALS,
INC.

CONSOLIDATED STATEMENTS
OF COMPREHENSIVE LOSS

(In $000s)

(Unaudited)

Three Months Ended
June 30,

Six Months Ended June
30,

2017

2018

2017

2018

Net loss

$

(2,187

)

$

(1,852

)

$

(3,742

)

$

(3,201

)

Translation adjustment

(6,613

)

9,624

(8,553

)

3,296

Unrealized foreign exchange gain on intercompany loans

6,626

(9,577

)

8,561

(3,301

)

Comprehensive loss

$

(2,174

)

$

(1,805

)

$

(3,734

)

$

(3,206

)

The accompanying
notes are an integral part of these consolidated financial statements.

5

CYCLACEL PHARMACEUTICALS,
INC.

CONSOLIDATED STATEMENTS
OF CASH FLOWS

(In $000s)

(Unaudited)

Six Months Ended
June 30,

2017

2018

Operating activities:

Net loss

$

(3,742

)

$

(3,201

)

Adjustments to reconcile net loss to net cash used in operating
activities:

Depreciation

17

15

Stock-based compensation

135

167

Changes in operating assets and liabilities:

Prepaid expenses and other assets

746

(860

)

Accounts payable and other current liabilities

(1,167

)

(63

)

Net cash used in operating activities

(4,011

)

(3,942

)

Investing activities:

Purchase of property, plant and equipment

(2

)

(31

)

Net cash used in investing activities

(2

)

(31

)

Financing activities:

Proceeds from issuance of common stock, net of issuance
costs

1,063

—

Payment of preferred stock dividend

(101

)

(101

)

Net cash used in financing activities

962

(101

)

Effect of exchange rate changes on cash and cash equivalents

122

12

Net (decrease) in cash and cash equivalents

(2,929

)

(4,086

)

Cash and cash equivalents, beginning
of period

16,520

23,910

Cash and cash equivalents, end of period

$

13,591

$

19,824

Supplemental cash flow information:

Cash received during the period for:

Interest

30

153

Taxes

1,815

—

Non cash financing activities:

Accrual of preferred stock dividends

50

50

The accompanying
notes are an integral part of these consolidated financial statements.

6

CYCLACEL PHARMACEUTICALS, INC.

NOTES TO UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS

1.

Company
Overview

Nature of Operations

Cyclacel Pharmaceuticals,
Inc. (“Cyclacel” or “the Company”) is a clinical-stage biopharmaceutical company using cell cycle control,
transcriptional regulation and DNA damage response biology to develop innovative, targeted medicines for cancer and other proliferative
diseases. Cyclacel is a pioneer company in the field of cell cycle biology with a vision to improve patient healthcare by translating
cancer biology into medicines.

As of June 30,
2018, substantially all efforts of the Company to date have been devoted to performing research and development, conducting clinical
trials, developing and acquiring intellectual property, raising capital and recruiting and training personnel.

2.

Summary
of Significant Accounting Policies

Basis of Presentation

The consolidated
balance sheet as of June 30, 2018, the consolidated statements of operations and comprehensive loss for the three and six months
ended June 30, 2018 and 2017 and the consolidated statements of cash flows for the six months ended June 30, 2018 and 2017, and
all related disclosures contained in the accompanying notes are unaudited. The consolidated balance sheet as of December 31,
2017 is derived from the audited consolidated financial statements included in the Annual Report on Form 10-K for the fiscal
year ended December 31, 2017 filed with the Securities and Exchange Commission (“SEC”). The consolidated financial
statements are presented on the basis of accounting principles that are generally accepted in the United States (“GAAP”)
for interim financial information and in accordance with the rules and regulations of the SEC. Accordingly, they do not include
all the information and footnotes required by accounting principles generally accepted in the United States for a complete set
of financial statements. In the opinion of management, all adjustments, which include only normal recurring adjustments necessary
to present fairly the consolidated balance sheet as of June 30, 2018, and the results of operations and comprehensive loss for
the three and six months ended June 30, 2018 and cash flows for the six months ended June 30, 2018, have been made. The interim
results for the three and six months ended June 30, 2018 are not necessarily indicative of the results to be expected for the
year ending December 31, 2018 or for any other year. The consolidated financial statements should be read in conjunction
with the audited consolidated financial statements and the accompanying notes for the year ended December 31, 2017 that are
included in the Company’s Annual Report on Form 10-K filed with the SEC.

Going Concern

Management considers
that there are no conditions or events, in the aggregate, that raise substantial doubt about the entity’s ability to continue
as a going concern for a period of at least one year from the date the financial statements are issued. The Company expects that
its cash of $19.8 million as of June 30, 2018 will be sufficient to fund its operating expenses and capital expenditure
requirements through to the first quarter of 2020.

This evaluation is based on relevant conditions
and events that are known and reasonably knowable at the date that the financial statements are issued, including:

a.

The Company’s current financial condition, including
its sources of liquidity;

b.

The Company’s conditional and unconditional obligations
due or anticipated within one year;

c.

The funds necessary to maintain the Company’s operations
considering its current financial condition, obligations, and other expected cash flows;
and

d.

Other conditions and events, when considered in conjunction
with the above that may adversely affect the Company’s ability to meet its obligations.

​The future viability of the Company
beyond the first quarter of 2020 is dependent on its ability to raise additional capital to finance its operations. The Company
will need to raise substantial additional capital to pursue the transcriptional regulation program, evaluating CYC065 in patients
with advanced cancers, the DNA damage response or CYC140 programs. Additional funding may not be available to the Company on favorable
terms, or at all. If the Company is unable to obtain additional funds, it will need to reduce operating expenses, enter into a
collaboration or other similar arrangement with respect to development and/or commercialization rights to its CDK inhibitors or
sapacitabine, if available, or be forced to delay or reduce the scope of its CDK inhibitors and sapacitabine development programs,
including any potential regulatory filings related to the SEAMLESS study, and/or limit or cease its operations. The Company’s
inability to raise capital as and when needed could have a negative impact on its financial condition and ability to pursue its
business strategies.

7

Fair Value of Financial Instruments

Financial instruments consist of cash equivalents,
accounts payable and accrued liabilities. The carrying amounts of cash equivalents, accounts payable and accrued liabilities approximate
their respective fair values due to the nature of the accounts, notably their short maturities.

Comprehensive Income (Loss)

All components
of comprehensive income (loss), including net income (loss), are reported in the financial statements in the period in which they
are recognized. Comprehensive income (loss) is defined as the change in equity during a period from transactions and other events
and circumstances from non-owner sources. Net income (loss) and other comprehensive income (loss), including foreign currency
translation adjustments, are reported, net of any related tax effect, to arrive at comprehensive income (loss). No taxes were
recorded on items of other comprehensive income (loss). There were no reclassifications out of other comprehensive income (loss)
during the three months and six months ended June 30, 2017 and 2018.

Revenue
recognition

On January 1,
2018, the Company adopted new guidance on revenue recognition, which has been codified within Accounting Standards Codification
(ASC) 606, Revenue from Contracts with Customers (“ASC 606”). The accounting policy applicable from January
1, 2018 and further details on the transition is described below. The comparative financial information for the three and six
months ended June 30, 2017 and as of December 31, 2017 has not been restated and is prepared in accordance with the accounting
policies that are described in Note 2 to the financial statements included in the Company’s Annual Report on Form 10-K.

With effect from
January 1, 2018, the Company recognizes revenue using the five step-model provided in ASC 606:

(1)
identify the contract with a customer;

(2)
identify the performance obligations in the contract;

(3)
determine the transaction price;

(4)
allocate the transaction price to the performance obligations in the contract; and

(5)
recognize revenue when, or as, the Company satisfies a performance obligation.

The transaction
price includes fixed payments and an estimate of variable consideration, including milestone payments. The Company determines
the variable consideration to be included in the transaction price by estimating the most-likely amount that will be received
and then applies a constraint to reduce the consideration to the amount which is probable of being received. When applying the
constraint, the Company considers:

·

Whether achievement
of a development milestone is highly susceptible to factors outside the entity’s
influence, such as milestones involving the judgment or actions of third parties, including
regulatory bodies;

·

Whether the
uncertainty about the achievement of the milestone is not expected to be resolved for
a long period of time;

·

Whether the
Company can reasonably predict that a milestone will be achieved based on previous experience;
and.

·

The complexity
and inherent uncertainty underlying the achievement of the milestone.

The transaction
price is allocated to each performance obligation based on the relative selling price of each performance obligation. The best
estimate of the selling price is determined after considering all reasonably available information, including market data and
conditions, entity-specific factors such as the cost structure of the deliverable and internal profit and pricing objectives.

The revenue allocated
to each performance obligation is recognized as or when the Company satisfies the performance obligation.

The Company recognizes
a contract asset, when the value of satisfied (or part satisfied) performance obligations is in excess of the payment due to the
Company, and deferred revenue when the amount of unconditional consideration is in excess of the value of satisfied (or part satisfied)
performance obligations. Once a right to receive consideration is unconditional, that amount is presented as a receivable.

8

With effect from
January 1, 2018, grant revenue, if new grants are obtained, will be presented as a contra against research and development expenses.

Accounting standards adopted in
the period

The Company has adopted Accounting Standards
Update (“ASU”) No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfer of Assets Other than Inventory (‘‘ASU
2016-16’’), which requires the recognition of the income tax consequences of an intra-entity transfer of an asset,
other than inventory, when the transfer occurs. The adoption of this standard did not have a material impact on the company’s
consolidated financial statements.

The Company has adopted ASU No. 2016-15,
Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”), to address diversity
in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The adoption
of this standard did not have a material impact on the company’s consolidated financial statements.

The Company has adopted ASU No. 2014-09,
Revenue from Contracts with Customers (Topic 606) (‘‘ASU 2014-09’’), which supersedes existing revenue
recognition guidance. The standard’s core principle is that a company will recognize revenue when it transfers promised
goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange
for those goods or services. The standard defines a five-step process to achieve this principle. ASU 2014-09 also requires additional
disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts.

The Company has adopted the guidance on
using a modified retrospective approach with the cumulative effect of initially applying the guidance recognized as of January
1, 2018. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements
and it did not have a cumulative effect.

The most significant impact relates to
its accounting for revenues related to grants received from government agencies or nonprofit organizations and revenues from contingent
“milestone” based payments. Under the new standard the Company will report grant revenue, if new grants are obtained
in a nonreciprocal transaction, as other income. Historically grants have been reported in revenue, but as the grantor is not
likely to be receiving a good or service in exchange for the payment the grant cannot be reported in revenue.

The Company also expects to recognize revenue
associated with contingent milestone-based payments at the time the contingent event is likely to be met, rather than when the
milestone is achieved. However, given the limited number of potential milestones owed to Cyclacel, and the inherent risk involved
in developing drugs, the timing of when milestones are recognized as revenues is unlikely to be affected.

Recently Issued Accounting Pronouncements

In July 2017, the FASB issued ASU No. 2017-11,
Accounting for Certain Financial Instruments with Down Round Features (“ASU 2017-11”), which simplifies the accounting
for certain financial instruments with down-round features. A down round feature is a provision in a financial instrument that
reduces the strike price of an issued financial instrument if the issuer sells shares of its stock for an amount less than the
currently stated strike price of the issued financial instrument or issues an equity-linked financial instrument with a strike
price below the currently stated strike price of the issued financial instrument. ASU 2017-11 is effective for fiscal years, and
interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted, including adoption
in an interim period. ASU 2017-11 should be adopted retrospectively for each prior reporting period presented or retrospectively
as of the beginning of the year of adoption. The Company anticipates this standard will not have a material impact on its consolidated
financial statements.

In February 2016, the FASB issued
guidance on accounting for leases in ASU No, 2016-02. The guidance requires that lessees recognize a lease liability, which is
a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and a right-of-use asset,
which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term
at the commencement date. The guidance is effective for fiscal years beginning after December 15, 2018. Early application
is permitted. The guidance must be adopted on a modified retrospective transition approach for leases existing, or entered into
after, the beginning of the earliest comparative period presented in the financial statements. The Company is currently evaluating
the impact of the guidance on the consolidated financial statements.

9

3.

Revenue

Revenue recognized in the three and six
months ended June 30, 2017 and 2018 was $0 and contract liability as of December 31, 2017 and June 30, 2018 was $150,000 and is
included in Accrued and other current liabilities on the accompanying balance sheets.

The aggregate transaction price that is
allocated to performance obligations that are unsatisfied (or partially unsatisfied) as of June 30, 2018 was $0.

4.

Net Loss
per Common Share

The Company calculates net loss per common
share in accordance with ASC 260 “Earnings Per Share” (“ASC 260”). Basic and diluted net loss per common
share was determined by dividing net loss applicable to common stockholders by the weighted average number of shares of common
stock outstanding during the period.

The following potentially dilutive securities
have not been included in the computation of diluted net loss per share for the three and six months ended June 30, 2017 and 2018,
as the result would be anti-dilutive:

June 30, 2017

June 30, 2018

Stock options

382,850

796,856

Convertible preferred stock

1,698

1,698

Series A preferred stock

-

132,000

Common stock warrants

-

7,490,500

Total shares excluded from calculation

384,548

8,421,055

5.

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets
consisted of the following (in $000s):

December 31,

June 30,

2017

2018

Research and development tax credit receivable

$

1,054

$

1,693

Prepayments and VAT receivable

772

998

Other current assets

238

172

$

2,064

$

2,863

Included in other current assets at June
30, 2018 is $66,000 of receivables. This relates to royalty payments receivable under a December 2005 Asset Purchase Agreement,
or APA, whereby Xcyte Therapies, Inc., or Xcyte (a business acquired by the Company in March 2006) sold certain assets and intellectual
property to ThermoFisher Scientific Company, or TSC (formerly Invitrogen Corporation) through an APA and other related agreements.
The assets and technology were not part of the Company’s product development plan following the transaction between Xcyte
and Cyclacel in March 2006. Accordingly, the company recognized $66,000 of other income related to this transaction during the
three months ended June 30, 2018.

6.

Accrued
and Other Liabilities

Accrued and other current liabilities consisted
of the following (in $000s):

December 31,

June 30,

2017

2018

Accrued research and development

$

1,645

$

1,780

Accrued legal and professional fees

248

274

Other current liabilities

662

265

$

2,555

$

2,319

10

Other current liabilities at December 31,
2017 and June 30, 2018 include $150,000 of contract liabilities in respect of payment received in advance of achieving a milestone
under the ManRos agreement.

7.

Stock Based
Compensation

ASC 718 requires compensation expense associated
with share-based awards to be recognized over the requisite service period, which for the Company is the period between the grant
date and the date the award vests or becomes exercisable. Most of the awards granted by the Company (and still outstanding) vest
ratably over one to four years. The Company recognizes all share-based awards under the straight-line attribution method, assuming
that all granted awards will vest. Forfeitures are recognized in the periods when they occur.

Stock based compensation has been reported
within expense line items on the consolidated statement of operations for the three and six months ended June 30, 2017 and 2018
as shown in the following table (in $000s):

Three Months Ended
June 30,

Six Months Ended
June 30,

2017

2018

2017

2018

General and administrative

49

63

99

122

Research and development

17

23

36

45

Stock-based compensation costs
before income taxes

66

86

135

167

2018 Plan

In May 2018, the Company’s stockholders
approved the 2018 Equity Incentive Plan (the “2018 Plan”), under which Cyclacel may make equity incentive grants to
its officers, employees, directors and consultants. The 2018 Plan replaces the 2015 Equity Incentive Plan (the “2015 Plan”).

The 2018 Plan will allow for the issuance
of up to 1,500,000 shares of the Company’s common stock pursuant to various types of award grants, including stock options
and restricted stock units. In addition, the 2018 Plan will allow up to 709,889 additional shares to be issued if awards outstanding
under the 2015 Plan are cancelled or expire on or after the date of the annual meeting of stockholders.

As of June 30, 2018, the Company has reserved
1,697,493 shares of the Company’s common stock under the 2018 Plan, including shares that were available under the 2015
Plan and carried forward to the 2018 Plan. Stock option awards granted under the Company’s equity incentive plans have a
maximum life of 10 years and generally vest over a one to four-year period from the date of grant.

There were 262,728 options granted during
the six months ended June 30, 2018. These options had grant date fair values ranging between $1.17-$1.29 per option. Of these
options, approximately 174,272 are performance based and will vest upon the fulfillment of certain clinical conditions. The Company
determined that the satisfaction of one of the conditions was probable as of June 30, 2018, but that the other vesting criteria
related to these awards were not probable as of June 30, 2018. As such, the Company recognized compensation cost for these grants
under the expectation that 25% of these awards will vest.

There were 170,853 options granted during
the year ended December 31, 2017. Of these options, 158,853 are performance based, which will vest upon the fulfillment of certain
clinical conditions. The Company determined that the satisfaction of one of the conditions was probable as of March 31, 2018,
but that the other vesting criteria related to these awards were not probable as of March 31, 2018. As such, the Company recognized
compensation cost for these grants under the expectation that 25% of these awards will vest.

There were no stock options exercised during
each of the six months ended June 30, 2017 and 2018, respectively. The Company does not expect to be able to benefit from the
deduction for stock option exercises that may occur because the company has tax loss carryforwards from prior periods that would
be expected to offset any potential taxable income.

11

Outstanding Options

A summary of the share option activity
and related information is as follows:

Number of Options
Outstanding

Weighted Average Exercise
Price Per Share

Weighted Average Remaining
Contractual Term (Years)

AggregateIntrinsicValue ($000)

Options outstanding at December 31, 2017

535,617

11.10

8.23

—

Granted

262,728

1.51

Cancelled/forfeited

(1,488

)

362.04

Options outstanding at June 30, 2018

796,857

7.28

8.41

—

Unvested at June 30, 2018

(620,804

)

2.64

8.95

—

Vested and exercisable at June 30, 2018

176,053

23.66

6.53

—

The fair value of the stock options granted
is calculated using the Black-Scholes option-pricing model as prescribed by ASC 718.

8.

Stockholders
Equity

July 2017 Underwritten Public Offering

On July 21, 2017, the Company issued (i)
3,154,000 Class A Units for $2 per unit, each consisting of one share of the Company’s common stock, and a warrant to purchase
one share of common stock (the “Class A Warrants”), and (ii) 8,872 Class B Units, each consisting of one share of
the Company’s Series A Convertible Preferred Stock, par value $0.001 per share (the “Series A Preferred Stock”),
convertible into 500 shares of Common Stock at the initial conversion price, and a warrant to purchase a number of shares of common
stock equal to $1,000.00 divided by the conversion price (the “Class B Warrants”) for $1,000 per unit. The net proceeds
to the Company after the underwriters’ exercise in full of the over-allotment option were approximately $13.7million, after
deducting underwriting discounts, commissions and other estimated offering expenses. The Class A Units and Class B Units have
no stand-alone rights and the shares of common stock, Series A Preferred Stock and the Class A and Class B Warrants comprising
those units were immediately separable.

The common stock, Class A Warrants and
Class B Warrants (together the “Warrants”) and Series A Preferred Stock are freestanding financial instruments. The
Warrants are classified within equity in the consolidated balance sheet and are not remeasured on a recurring basis. The Series
A Preferred Stock is classified within equity in the consolidated balance sheet.

Warrants

As of June 30, 2018, there were 7,490,500
warrants outstanding, each with an exercise price of $2.00. All such warrants were issued in connection with the July 2017 Underwritten
Public Offering and are immediately exercisable. The Warrants expire in 2024. Subject to limited exceptions, a holder of warrants
will not have the right to exercise any portion of its warrants if the holder (together with such holder’s affiliates, and
any persons acting as a group together with such holder or any of such holder’s affiliates) would beneficially own a number
of shares of common stock in excess of 4.99% (or, at the election of the purchaser, 9.99%) of the shares of our Common Stock then
outstanding after giving effect to such exercise.

The exercise price and the number of shares
issuable upon exercise of the warrants is subject to appropriate adjustment in the event of recapitalization events, stock dividends,
stock splits, stock combinations, reclassifications, reorganizations or similar events affecting the Company’s common stock.
The warrant holders must pay the exercise price in cash upon exercise of the warrants, unless such warrant holders are utilizing
the cashless exercise provision of the warrants. On the expiration date, unexercised warrants will automatically be exercised
via the “cashless” exercise provision.

Prior to the exercise of any warrants to
purchase common stock, holders of the warrants will not have any of the rights of holders of the common stock purchasable upon
exercise, including the right to vote, except as set forth therein.

There was no exercise of warrants during
the three and six months ended June 30, 2018.

Series A Preferred Stock

8,872 shares of the Company’s Series
A Preferred Stock were issued in the July 2017 Underwritten Public Offering. During the year ended December 31, 2017, 8,608 shares
of the Series A Preferred Stock were converted into 4,304,000 shares of common stock. As of June 30, 2018, 264 shares of the Series
A Preferred Stock remain issued and outstanding.

12

Each share of Series A Preferred Stock
is convertible at any time at the option of the holder thereof, into a number of shares of common stock determined by dividing
$1,000 by the initial conversion price of $2.00 per share, subject to a 4.99% blocker provision, or, upon election by a holder
prior to the issuance of shares of Series A Preferred Stock, 9.99%, and is subject to adjustment for stock splits, stock dividends,
distributions, subdivisions and combinations. The 264 shares of Series A Preferred Stock issued and outstanding at June 30, 2018,
are convertible into 132,000 shares of common stock.

In the event of a liquidation, the holders
of shares of the Series A Preferred Stock may participate on an as-converted-to-common-stock basis in any distribution of assets
of the Company. The Company shall not pay any dividends on shares of common stock (other than dividends in the form of common
stock) unless and until such time as dividends on each share of Series A Preferred Stock are paid on an as-converted basis. There
is no restriction on the Company’s ability to repurchase shares of Series A Preferred Stock while there is any arrearage
in the payment of dividends on such shares, and there are no sinking fund provisions applicable to the Series A Preferred Stock.

Subject to certain conditions, at any time
following the issuance of the Series A Preferred Stock, the Company has the right to cause each holder of the Series A Preferred
Stock to convert all or part of such holder’s Series A Preferred Stock in the event that (i) the volume weighted average
price of our common stock for 30 consecutive trading days (the “Measurement Period”) exceeds 300% of the initial conversion
price of the Series A Preferred Stock (subject to adjustment for forward and reverse stock splits, recapitalizations, stock dividends
and similar transactions), (ii) the daily trading volume on each Trading Day during such Measurement Period exceeds $500,000 per
trading day and (iii) the holder is not in possession of any information that constitutes or might constitute, material non-public
information which was provided by the Company. The right to cause each holder of the Series A Preferred Stock to convert all or
part of such holder’s Series A Preferred Stock shall be exercised ratably among the holders of the then outstanding preferred
stock.

The Series A Preferred Stock has no maturity
date, will carry the same dividend rights as the common stock, and with certain exceptions contains no voting rights. In the event
of any liquidation or dissolution of the Company, the Series A Preferred Stock ranks senior to the common stock in the distribution
of assets, to the extent legally available for distribution.

6% Convertible Exchangeable Preferred
Stock

As of June 30, 2018, there were 335,273
shares of the Company’s 6% Convertible Exchangeable Preferred Stock (“6% Preferred Stock”) issued and outstanding
at an issue price of $10.00 per share. Dividends on the 6% Preferred Stock are cumulative from the date of original issuance at
the annual rate of 6% of the liquidation preference of the 6% Preferred Stock, payable quarterly on the first day of February,
May, August and November, commencing February 1, 2005. Any dividends must be declared by the Company’s Board and
must come from funds that are legally available for dividend payments. The 6% Preferred Stock has a liquidation preference of
$10.00 per share, plus accrued and unpaid dividends.

The Company may automatically convert the
6% Preferred Stock into common stock if the per share closing price of the Company’s common stock has exceeded $2,961, which
is 150% of the conversion price of the 6% Preferred Stock, for at least 20 trading days during any 30-day trading period, ending
within five trading days prior to notice of automatic conversion.

The 6% Preferred Stock has no maturity
date and no voting rights prior to conversion into common stock, except under limited circumstances.

The Company may, at its option, redeem
the 6% Preferred Stock in whole or in part, out of funds legally available at the redemption price of $10.00 per share.

The 6% Preferred Stock is exchangeable,
in whole but not in part, at the option of the Company on any dividend payment date beginning on November 1, 2005 (the “Exchange
Date”) for the Company’s 6% Convertible Subordinated Debentures (“Debentures”) at the rate of $10.00 principal
amount of Debentures for each share of 6% Preferred Stock. The Debentures, if issued, will mature 25 years after the Exchange
Date and have terms substantially similar to those of the 6% Preferred Stock. No such exchanges have taken place to date.

Subsequent Events

On May 31, 2018, the Board of Directors
declared a quarterly cash dividend in the amount of $0.15 per share on the Company’s Preferred Stock. The cash dividend
was paid on August 1, 2018 to the holders of record of the Preferred Stock as of the close of business on July 13, 2018.

13

Item 2. Management’s
Discussion and Analysis of Financial Condition and Results of Operations

CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q,
including, without limitation, Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains
“forward-looking statements” within the meaning of Section 27A of the Securities Exchange Act of 1933 as amended
and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We intend that the forward-looking
statements be covered by the safe harbor for forward-looking statements in the Exchange Act. The forward-looking information is
based on various factors and was derived using numerous assumptions. All statements, other than statements of historical fact,
that address activities, events or developments that we intend, expect, project, believe or anticipate will or may occur in the
future are forward-looking statements. Such statements are based upon certain assumptions and assessments made by our management
in light of their experience and their perception of historical trends, current conditions, expected future developments and other
factors they believe to be appropriate. These forward-looking statements are usually accompanied by words such as “believe,”
“anticipate,” “plan,” “seek,” “expect,” “intend” and similar expressions.

Forward-looking statements necessarily
involve risks and uncertainties, and our actual results could differ materially from those anticipated in the forward looking
statements due to a number of factors, including those set forth in Part I, Item 1A, entitled “Risk Factors,”
of our Annual Report on Form 10-K for the year ended December 31, 2017, as updated and supplemented by Part II, Item
1A, entitled “Risk Factors,” of our Quarterly Reports on Form 10-Q, and elsewhere in this report. These factors
as well as other cautionary statements made in this Quarterly Report on Form 10-Q, should be read and understood as being
applicable to all related forward-looking statements wherever they appear herein. The forward-looking statements contained in
this Quarterly Report on Form 10-Q represent our judgment as of the date hereof. We encourage you to read those descriptions
carefully. We caution you not to place undue reliance on the forward-looking statements contained in this report. These statements,
like all statements in this report, speak only as of the date of this report (unless an earlier date is indicated) and we undertake
no obligation to update or revise the statements except as required by law. Such forward-looking statements are not guarantees
of future performance and actual results will likely differ, perhaps materially, from those suggested by such forward-looking
statements. In this report, “Cyclacel,” the “Company,” “we,” “us,” and “our”
refer to Cyclacel Pharmaceuticals, Inc.

Overview

Through the first half of 2018, our focus
has been on our transcriptional regulation program where we are evaluating CYC065, our cyclin dependent kinase, or CDK, inhibitor
and our DNA damage response, or DDR, program where we are evaluating sapacitabine in combination with our CDK inhibitor seliciclib
in Phase1/2 studies in patients with solid tumors. Additionally in our SEAMLESS study of sapacitabine in Acute Myeloid Leukemia,
or AML, stratified and exploratory subgroup analyses have been completed and have defined a patient population who may benefit
from treatment with the experimental arm. We plan to discuss the SEAMLESS data with European and US regulatory authorities.

Transcriptional
Regulation Program

We
are progressing clinical development of CYC065 in an ongoing, first-in-human, Phase 1 trial in patients with advanced solid tumors.

CDKs are a family of enzymes first discovered
as regulators of the cell cycle, but that are now understood to also provide pivotal functions in the regulation of transcription,
DNA repair and metastatic spread. The precise selectivity of an individual CDK inhibitor molecule for certain specific CDKs is
key to targeting particular tumor types and minimizing undesirable side effects through non-specific antiproliferative activity.

In general, cell cycle regulation is less
well controlled in cancer cells than in normal cells, which explains in part why cancer cells divide uncontrollably. Different
CDKs are responsible for control of different aspects of proliferation, and when dysregulated, can be drivers of particular cancer
sub-sets. Modulating CDK activity with targeted therapies is an attractive strategy to reinforce cell cycle control and decrease
the rate of abnormal proliferation of cancer cells. The first Food and Drug Administration, or FDA, approval in March 2015
of a CDK inhibitor for palbociclib, and more recently in 2017, ribociclib and abemaciclib, for a type of breast cancer, has led
to great interest in the development of this class of drugs as oncology therapeutics.

Cyclacel’s founding scientist, Professor
Sir David Lane, is an internationally recognized authority in cell cycle biology, who discovered p53, a key tumor suppressor that
malfunctions in about two-thirds of human cancers. Under his guidance, Cyclacel’s drug discovery and development programs
concentrated on the CDK2/9 isoforms, which operate as key components of the p53 pathway. These efforts resulted in bringing two
molecules into clinical trials: seliciclib, a first-generation CDK inhibitor, and CYC065, a second-generation CDK inhibitor, which
has benefited from the Company’s clinical experience with seliciclib.

14

Seliciclib, our first-generation CDK inhibitor,
is being evaluated in an all-oral Phase 1/2 combination study with our sapacitabine in patients with BRCA mutations, and
has been evaluated to date in approximately 450 patients.

CYC065 is being evaluated in an ongoing,
first-in-human, Phase 1 trial in patients with advanced solid tumors. Similar to palbociclib, ribociclib and abemaciclib,
CYC065 may be most useful as a therapy for patients with both liquid and solid tumors in combination with other anticancer agents,
including Bcl-2 antagonists, such as venetoclax, or HER2 inhibitors, such as trastuzumab.

DNA Damage Response, or DDR, Program

In
our DNA damage response program we are evaluating sapacitabine in combination with our first-generation CDK inhibitor seliciclib
in solid tumors.

Many cancers have defects in the way in
which cells monitor and repair damaged DNA, collectively termed DNA damage response, or DDR. These deficiencies in DDR pathways
render cells more susceptible to DNA damage. Many traditional cancer treatments, such as DNA-damaging chemotherapy and radiotherapy,
are based on this finding. However, such treatments are often accompanied by significant and unwanted side effects. Developing
treatments which target specific DDR deficiencies to preferentially kill cancer cells, while minimizing the impact on normal cells,
has potential for more selective, better tolerated therapies to improve survival in multiple cancers.

We have focused on developing treatments
targeting DNA damage pathways for several years. For example, drug candidate sapacitabine is an oral nucleoside analogue prodrug
whose metabolite, CNDAC, generates single-strand DNA breaks, or SSB, either leading to arrest of the cell cycle at G2 phase or
development of double-strand DNA breaks, or DSB. Repair of CNDAC-induced DSB is dependent on the homologous recombination, or
HR repair pathway. BRCA mutations in cancer cells are a cause of HR deficiency, making such cancer cells more susceptible to cell
death induced by sapacitabine.

We are evaluating sapacitabine in a Phase
1/2 combination study with seliciclib in patients with BRCA mutations.

Cyclacel currently retains virtually all
marketing rights worldwide to the compounds associated with the Company’s drug programs.

Results of Operations

Three Months Ended June 30, 2017
and 2018

Results of Continuing Operations

Revenues

Revenues for the three months ended June
30, 2017 and 2018 were $0 and $0.

The future

Recognition of any further revenue from
milestones under a collaboration, licensing and supply agreement with ManRos Therapeutics SA is dependent on the clinical progress
of the program, which we do not control.

Research and development expenses

From our inception, we have focused on
drug discovery and development programs, with a particular emphasis on orally-available anticancer agents, and our research and
development expenses have represented costs incurred to discover and develop novel small molecule therapeutics, including clinical
trial costs for CYC065, CYC140, sapacitabine, seliciclib, and sapacitabine in combination with seliciclib. We have also incurred
costs in the advancement of product candidates toward clinical and pre-clinical trials and the development of in-house research
to advance our biomarker program and technology platforms. We expense all research and development costs as they are incurred.
Research and development expenses primarily include:

·

Clinical trial
and regulatory-related costs;

·

Payroll and
personnel-related expenses, including consultants and contract research organizations;

15

·

Preclinical
studies and laboratory supplies and materials;

·

Technology license
costs;

·

Stock-based
compensation; and

·

Rent and facility
expenses for our laboratories.

The following table provides information
with respect to our research and development expenditures for the three months ended June 30, 2017 and 2018 (in $000s except percentages):

Three Months Ended

June 30,

Difference

2017

2018

$

%

Transcriptional Regulation

$

332

$

637

$

305

92

DNA Damage Response

83

23

(60

)

(72

)

Sapacitabine

746

340

(406

)

(54

)

Other research and development
programs and expenses

61

182

121

198

Total research and development
expenses

$

1,222

$

1,182

$

(40

)

(3

)

Total research and development expenses
represented 49% and 48% of our operating expenses for the three months ended June 30, 2017 and 2018, respectively.

Research and development expenses remained
flat at $1.2 million for the three months ended June 30, 2017 and 2018. Research and development expenses relating to transcriptional
regulation increased by $0.3 million from $0.3 million for the three months ended June 30, 2017 to $0.6 million for the three
months ended June 30, 2018, primarily due to progression of the clinical evaluation of CYC065. Research and development expenses
relating to sapacitabine decreased by $0.4 million from $0.7 million for the three months ended June 30, 2017 to $0.3 million
for the three months ended June 30, 2018, primarily as a result of a reduction in expenses associated with the SEAMLESS Phase
3 trial and related costs.

The future

We anticipate that overall research and
development expenses for the year ended December 31, 2018 will increase compared to the year ended December 31, 2017,
as we progress the clinical development of CYC065. The timing and extent of any future SEAMLESS expenditure, including the possibility
of registration submissions to regulatory authorities in Europe and the U.S., are dependent upon the outcome of discussions with
regulatory authorities.

General and administrative expenses

General and administrative expenses include
costs for administrative personnel, legal and other professional expenses and general corporate expenses. The following table
summarizes the general and administrative expenses for the three months ended June 30, 2017 and 2018 (in $000s except percentages):

Three Months Ended
June 30,

Difference

2017

2018

$

%

Total general and administrative
expenses

$

1,267

$

1,283

$

16

1

Total general and administration expenses
represented 51% and 52% of our operating expenses for the three months ended June 30, 2017 and 2018, respectively. General and
administrative expenses remained flat at $1.3 million for the three months ended June 30, 2017 and 2018.

The future

We expect general and administrative expenses
for the year ended December 31, 2018 compared to our expenses for the year ended December 31, 2017 to remain relatively
flat.

16

Other income, net

The following table summarizes other income
for the three months ended June 30, 2017 and 2018 (in $000 except percentages):

Three Months Ended
June 30,

Difference

2017

2018

$

%

Foreign exchange gains (losses)

$

16

$

(39

)

$

(55

)

(344

)

Interest income

18

84

66

367

Other income, net

-

66

66

100

Total other income

$

34

$

111

$

77

226

Total other income increased by approximately
$77,000 from $34,000 for the three months ended June 30, 2017 to $111,000 for the three months ended June 30, 2018. The increase
in other income is primarily related to royalty receivable under a December 2005 Asset Purchase Agreement, or APA, whereby Xcyte
Therapies, Inc., or Xcyte (a business acquired by the Company in March 2006) sold certain assets and intellectual property to
ThermoFisher Scientific Company, or TSC (formerly Invitrogen Corporation) through an APA and other related agreements. The assets
and technology were not part of the Company’s product development plan following the transaction between Xcyte and Cyclacel
in March 2006. Accordingly, the company recognized $0 million and $66,000 of other income arising from sales related to this transaction
during the three months ended June 30, 2017 and 2018 respectively. We have no knowledge of TSC’s activities and cannot predict
when we may receive income under the APA, if any.

Foreign exchange gains (losses)

Foreign exchange losses decreased by approximately
$55,000, from a gain of $16,000 for the three months ended June 30, 2017, to a loss of $39,000 for the three months ended June
30, 2018.

The future

Other income (expense), net for the year
ended December 31, 2018, will continue to be impacted by changes in foreign exchange rates and the receipt of income under the
APA. As we are not in control of sales made by TSC, we are unable to estimate the level and timing of income under the APA, if
any.

Because the nature of funding advanced
through intercompany loans is that of a long-term investment, unrealized foreign exchange gains and losses on such funding will
be recognized in other comprehensive income until repayment of the intercompany loan becomes foreseeable.

Income tax benefit

Credit is taken for research and development
tax credits, which are claimed from the United Kingdom’s revenue and customs authority, or HMRC, in respect of qualifying
research and development costs incurred.

The following table summarizes total income
tax benefit for the three months ended June 30, 2017 and 2018 (in $000s except percentages):

Three Months Ended
June 30,

Difference

2017

2018

$

%

Total income tax benefit

$

268

$

502

$

234

87

The total income tax benefit, which comprised
of research and development tax credits recoverable, increased by $0.2 million from an income tax benefit of $0.3 million for
the three months ended June 30, 2017 to an income tax benefit of $0.5 million for the three months ended June 30, 2018. The level
of tax credits recoverable is linked directly to qualifying research and development expenditure incurred in any one year and
the availability of trading losses.

17

The future

We expect to continue to be eligible to
receive United Kingdom research and development tax credits for the foreseeable future and will elect to do so. The amount of
tax credits we will receive is entirely dependent on the amount of eligible expenses we incur and having sufficient trading losses.
We expect our qualifying research and development expenditure to increase for the year ended December 31, 2018 in comparison
to the year ended December 31, 2017.

Six Months Ended June 30, 2017
and 2018

Results of Continuing Operations

Revenues

Revenues for the six months ended June
30, 2017 and 2018 were $0 and $0.

The future

Recognition of any further revenue from
milestones under a collaboration, licensing and supply agreement with ManRos Therapeutics SA is dependent on the clinical progress
of the program, which we do not control.

Research and development expenses

From our inception, we have focused on
drug discovery and development programs, with a particular emphasis on orally-available anticancer agents, and our research and
development expenses have represented costs incurred to discover and develop novel small molecule therapeutics, including clinical
trial costs for our CDK inhibitors, sapacitabine and sapacitabine in combination with seliciclib. We have also incurred costs
in the advancement of product candidates toward clinical and pre-clinical trials and the development of in-house research to advance
our biomarker program and technology platforms. We expense all research and development costs as they are incurred. Research and
development expenses primarily include:

·

Clinical trial
and regulatory-related costs;

·

Payroll and
personnel-related expenses, including consultants and contract research;

·

Preclinical
studies and laboratory supplies and materials;

·

Technology license
costs; and

·

Rent and facility
expenses for our laboratories.

The following table provides information
with respect to our research and development expenditures for the six months ended June 30, 2017 and 2018 (in $000s except percentages):

Six Months Ended

June 30,

Difference

2017

2018

$

%

Transcriptional Regulation

$

506

$

1,106

$

600

119

DNA Damage Response

235

60

(175

)

(74

)

Sapacitabine

1,652

482

(1,170

)

(71

)

Other research and development programs and expenses

141

332

191

135

Total research and development expenses

$

2,534

$

1,980

$

(554

)

(22

)

18

Total research and development expenses
represented 49% and 43% of our operating expenses for the six months ended June 30, 2017 and 2018, respectively.

Research and development expenses decreased
by $0.5 million from $2.5 million for the six months ended June 30, 2017 to $2.0 million for the six months ended June 30, 2018.
Research and development expenses relating to transcriptional regulation increased by $0.6 million from $0.5 million for the six
months ended June 30, 2017 to $1.1 million for the six months ended June 30, 2018, as the clinical evaluation CYC065 progresses.
Research and development expenses relating to sapacitabine decreased by $1.2 million from $1.7 million for the six months ended
June 30, 2017 to $0.5 million for the six months ended June 30, 2018, primarily as a result of a reduction in expenditures associated
with the SEAMLESS Phase 3 trial and related costs.

The future

We anticipate that overall research and
development expenses for the year ended December 31, 2018 will increase compared to the year ended December 31, 2017,
as we progress the clinical development of CYC065. The timing and extent of any future SEAMLESS expenditure, including the possibility
of registration submissions to regulatory authorities in Europe and the U.S., are dependent upon the outcome of discussions with
regulatory authorities.

General and administrative expenses

General and administrative expenses include
costs for administrative personnel, legal and other professional expenses and general corporate expenses. The following table
summarizes the general and administrative expenses for the six months ended June 30, 2017 and 2018 (in $000s except percentages):

Six Months Ended
June 30,

Difference

2017

2018

$

%

Total general and administrative expenses

$

2,648

$

2,647

$

(1

)

(0

)

Total general and administration expenses
represented 51% and 57% of our operating expenses for the six months ended June 30, 2017 and 2018, respectively. General and administrative
expenses remained flat at $2.6 million for the six months ended June 30, 2017 and 2018.

The future

We expect general and administrative expenditures
for the year ended December 31, 2018 compared to our expenditures for the year ended December 31, 2017 to remain relatively
flat.

Other income, net

The following table summarizes other income,
net for the six months ended June 30, 2017 and 2018 (in $000 except percentages):

Six Months Ended
June 30,

Difference

2017

2018

$

%

Foreign exchange losses

$

(43

)

$

(43

)

$

—

—

Interest income

30

153

123

410

Other income, net

879

632

(247

)

(28

)

Total other income

$

866

$

742

$

(124

)

(14

)

Total other income
decreased by approximately $0.1 million, from $0.9 million for the six months ended June 30, 2017 to $0.7 million for the six
months ended June 30, 2018. The decrease in other income is primarily related to royalty payments receivable under a December
2005 APA, whereby Xcyte sold certain assets and intellectual property to TSC through an APA and other related agreements. We have
no knowledge of TSC’s activities and cannot predict when we may receive income under the APA, if any.

Foreign exchange losses

Foreign exchange losses remained flat at
approximately $43,000 for the six months ended June 30, 2017 and 2018.

19

The future

Other income (expense), net for the year
ended December 31, 2018 will continue to be impacted by changes in foreign exchange rates and the receipt of income under the
APA. As we are not in control of sales made by TSC we are unable to estimate the level and timing of income under the APA, if
any.

Because the nature of funding advanced
through intercompany loans is that of a long-term investment in nature, unrealized foreign exchange gains and losses on such funding
will be recognized in other comprehensive income until repayment of the intercompany loan becomes foreseeable.

Income tax benefit

Credit is taken for research and development
tax credits, which are claimed from the United Kingdom’s revenue and customs authority, or HMRC, in respect of qualifying
research and development costs incurred.

The following table summarizes total income
tax benefit for the six months ended June 30, 2017 and 2018 (in $000s except percentages):

Six Months Ended
June 30,

Difference

2017

2018

$

%

Total income tax benefit

$

574

$

684

$

110

19

The total income tax benefit, which comprised
of research and development tax credits recoverable, increased by $0.1 million from an income tax benefit of $0.6 million for
the six months ended June 30, 2017 to an income tax benefit of $0.7 million for the six months ended June 30, 2018. The level
of tax credits recoverable is linked directly to qualifying research and development expenditure incurred in any one year.

The future

We expect to continue to be eligible to
receive United Kingdom research and development tax credits for the foreseeable future and will elect to do so. The amount of
tax credits we will receive is entirely dependent on the amount of eligible expenses we incur. We expect our qualifying research
and development expenditure to increase for the year ended December 31, 2018 in comparison to the year ended December 31,
2017.

Liquidity and Capital Resources

The following is a summary of our key liquidity
measures as of June 30, 2017 and 2018 (in thousands):

Six Months Ended
June 30,

2017

2018

Cash and
cash equivalents

$

13,591

$

19,824

Working capital:

Current assets

$

16,051

$

22,687

Current
liabilities

(4,319

)

(3,994

)

Total working capital

$

11,732

$

18,693

Since our inception, we have relied primarily
on the proceeds from sales of common and preferred equity securities to finance our operations and internal growth. Additional
funding has come through research and development tax credits, government grants, the sale of product rights, interest on investments,
licensing revenue, and a limited amount of product revenue from operations discontinued in September 2012. We have incurred significant
losses since our inception. As of June 30, 2018, we had an accumulated deficit of $ 345.7 million.

20

Cash Flows

Cash used in operating, investing and financing
activities for the six months ended June 30, 2017 and 2018 is summarized as follows (in thousands):

Six months ended

June 30,

2017

2018

Net cash used in operating activities

$

(4,011

)

$

(3,942

)

Net cash used in investing activities

(2

)

(31

)

Net cash provided by (used in) financing activities

962

(101

)

Operating activities

Net cash used in operating activities decreased
by $0.1 million, from $4.0 million for the six months ended June 30, 2017 to $3.9 million for the six months ended June 30, 2018.
The decrease in cash used by operating activities was primarily the result of a change in working capital of $0.4 million and
a reduction in net loss of $0.5 million.

Investing activities

Net cash used
in investing activities increased by approximately $29,000 for the six months ended June 30, 2018 due to capital expenditures
on IT equipment.

Financing activities

Net cash used
in financing activities in the six months ended June 30, 2018 of $0.1 million relates to payment of dividends to the holders of
our Preferred Stock. Net cash provided by financing activities was $1.0 million for the six months ended June 30, 2017, primarily
as a result of approximately $1.1 million in net proceeds from the issuance of common stock under the At Market Issuance Sales
Agreement with FBR entered into in June 2016 offset by dividend payments of approximately $0.1 million to the holders of our Preferred
Stock.

Operating Capital
and Capital Expenditure Requirements

We expect to continue
to incur substantial operating losses in the future and cannot guarantee that we will generate any significant product revenues
until a product candidate has been approved by the FDA or EMA in other countries and successfully commercialized.

We believe that
existing funds together with cash generated from operations, such as the R&D tax credit, and recent financing activities,
are sufficient to satisfy our planned working capital, capital expenditures and other financial commitments through to the first
quarter of 2020. However, we do not currently have sufficient funds to complete development and commercialization of any of our
drug candidates. Current business and capital market risks could have a detrimental effect on the availability of sources of funding
and our ability to access them in the future, which may delay or impede our progress of advancing our drugs currently in the clinical
pipeline to approval by the FDA or EMA for commercialization. Additionally, we plan to continue to evaluate in-licensing and acquisition
opportunities to gain access to new drugs or drug targets that would fit with our strategy. Any such transaction would likely
increase our funding needs in the future.

Our future funding
requirements will depend on many factors, including but not limited to:

•

the rate of
progress and cost of our clinical trials, preclinical studies and other discovery and
research and development activities;

•

the costs associated
with establishing manufacturing and commercialization capabilities;

•

the costs of
acquiring or investing in businesses, product candidates and technologies;

•

the costs of
filing, prosecuting, defending and enforcing any patent claims and other intellectual
property rights;

21

•

the costs and
timing of seeking and obtaining FDA and EMA approvals;

•

the effect
of competing technological and market developments; and

•

the economic
and other terms and timing of any collaboration, licensing or other arrangements into
which we may enter.

Until we can generate
a sufficient amount of product revenue to finance our cash requirements, which we may never do, we expect to finance future cash
needs primarily through public or private equity offerings, debt financings or strategic collaborations. Although we are not reliant
on institutional credit finance and therefore not subject to debt covenant compliance requirements or potential withdrawal of
credit by banks, we are reliant on the availability of funds and activity in equity markets. We do not know whether additional
funding will be available on acceptable terms, or at all. If we are not able to secure additional funding when needed, we may
have to delay, reduce the scope of or eliminate one or more of our clinical trials or research and development programs or make
changes to our operating plan. In addition, we may have to partner one or more of our product candidate programs at an earlier
stage of development, which would lower the economic value of those programs to us.

Item 3. Quantitative
and Qualitative Disclosures about Market Risk

As a smaller reporting
company, we are not required to provide information in response to this item.

Item 4. Controls
and Procedures

Under the supervision and with the participation
of our management, including our chief executive officer and principal financial and accounting officer, we conducted an evaluation
of the effectiveness, as of June 30, 2018, of our disclosure controls and procedures, as defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act. Based upon such evaluation, our chief
executive officer and principal financial and accounting officer have concluded that, as of June 30, 2018, our disclosure controls
and procedures were effective to provide reasonable assurance that the information we are required to disclose in our filings
with the Securities and Exchange Commission, or SEC, under the Exchange Act (i) is recorded, processed, summarized and reported
within the time periods specified in the SEC’s rules and forms, and (ii) accumulated and communicated to our management,
including our chief executive officer and principal financial and accounting officer, as appropriate to allow timely decisions
regarding required disclosure.

Changes in Internal Control over Financial
Reporting

Beginning January 1, 2018, we implemented
ASU 2014-09, Revenue from Contracts with Customers (Topic 606). There were no significant changes made to our internal
controls over financial reporting as a result of the implementation.

Inherent Limitation on the Effectiveness
of Internal Controls

The effectiveness of any system of internal
control over financial reporting, including ours, is subject to inherent limitations, including the exercise of judgment in designing,
implementing, operating, and evaluating the controls and procedures, and the inability to eliminate misconduct completely. Accordingly,
any system of internal control over financial reporting, including ours, no matter how well designed and operated, can only provide
reasonable, not absolute, assurances. In addition, projections of any evaluation of effectiveness to future periods are subject
to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies
or procedures may deteriorate. We intend to continue to monitor and upgrade our internal controls as necessary or appropriate
for our business, but cannot assure you that such improvements will be sufficient to provide us with effective internal control
over financial reporting.

22

PART II.
Other Information

Item 1. Legal
Proceedings

None.

Item
1A. Risk Factors

Except as set forth below,
there have been no material changes to our risk factors contained in our Annual Report on Form 10-K for the period ended December
31, 2017. For a further discussion of our Risk Factors, refer to the “Risk Factors” discussion contained in our Annual
Report on Form 10-K.

We
are subject to export control laws, data protection laws, customs laws, sanctions laws and other laws governing our operations.
If we fail to comply with these laws, we could be subject penalties, other remedial measures and legal expenses, which could adversely
affect our business, results of operations and financial condition.

We are subject
to laws and regulations governing our international operations, including regulations administered by the government of the United
States and authorities in the European Union, including applicable export control regulations, economic sanctions on countries
and persons, customs requirements and currency exchange regulations, collectively referred to as the Trade Control laws.
In addition, various statutes and rules in Europe and elsewhere around the world regulate privacy and data protection, which affect
our collection, use, storage, and transfer of information both abroad and in the United States. New laws and regulations are periodically
being enacted in this area, which remains in a state of flux. Monitoring and complying with these laws requires substantial financial
resources.

In particular,
the European Union’s General Data Protection Regulation (“GDPR”) took effect in May 2018, and will require us
to meet new and more stringent requirements regarding the handling of personal data about European Union residents. Failure to
meet GDPR requirements could result in penalties of up to 4% of our worldwide revenue. The GDPR is a complex law and the regulatory
guidance is still evolving, including with respect to how the GDPR should be applied in the context of clinical studies.
Furthermore, many of the countries within the European Union are still in the process of drafting supplementary data protection
legislation in key fields where the GDPR allows for national variation, including the fields of clinical study and other health-related
information. These variations in European data protection laws may raise our costs of compliance and result in greater legal
risks. There is no assurance that we will be completely effective in ensuring our compliance with all applicable legal requirements,
including Trade Control and data protection laws such as the GDPR. If we are not in compliance with these laws, we may be subject
to penalties, lawsuits and damages claims, disgorgement and other sanctions and remedial measures, orders to stop transferring
or using personal data, and legal expenses, which could have an adverse impact on our business, financial condition, results of
operations and liquidity.

The following materials from Cyclacel Pharmaceuticals, Inc.’s Quarterly Report
on Form 10-Q for the period ended June 30, 2018, formatted in XBRL (Extensible Business Reporting Language): (i) the
Consolidated Statements of Income, (ii) the Consolidated Balance Sheets, (iii) the Consolidated Statements of Cash
Flows, and (iv) Notes to Consolidated Financial Statements.

23

SIGNATURES

Pursuant to the requirements of Section 13
or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned.

CYCLACEL PHARMACEUTICALS, INC.

Date: August 9, 2018

By:

/s/ Paul McBarron

Paul McBarron

Chief Operating Officer, Chief Financial Officer and

Executive Vice President, Finance

24

EXHIBIT 31.1

Certification
of Principal Executive OfficerPursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Spiro Rombotis, certify that:

1.

I have reviewed this Quarterly Report on Form 10-Q for the
three months ended June 30, 2018 of Cyclacel Pharmaceuticals, Inc.;

2.

Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;

4.

The registrant’s other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:

a)

designed such disclosure controls and procedures,
or caused
such disclosure controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the period in
which this report is being prepared;

b)

designed such internal control over financial reporting, or
caused such internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;

c)

evaluated the effectiveness of the registrant’s disclosure
controls and procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and

d)

disclosed in this report any change in the registrant’s
internal control over financial reporting that occurred during the registrant’s
most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably likely to materially
affect, the registrant’s internal control over financial reporting: and

5.

The registrant’s other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control over financial reporting,
to the registrant’s auditors and the audit committee of the registrant’s
board of directors (or persons performing the equivalent functions):

a)

all significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant’s ability to record, process, summarize
and report financial information; and

b)

any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrant’s internal control
over financial reporting.

Date: August 9, 2018

/s/ Spiro Rombotis

Spiro Rombotis

President & Chief Executive Officer

(Principal Executive Officer)

EXHIBIT 31.2

Certification
of Principal Financial OfficerPursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Paul McBarron, certify that:

1.

I have reviewed this Quarterly Report on Form 10-Q for the
three months ended June 30, 2018 of Cyclacel Pharmaceuticals, Inc.;

2.

Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;

4.

The registrant’s other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:

a)

designed such disclosure controls and procedures,
or caused
such disclosure controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the period in
which this report is being prepared;

b)

designed such internal control over financial reporting, or
caused such internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;

c)

evaluated the effectiveness of the registrant’s disclosure
controls and procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and

d)

disclosed in this report any change in the registrant’s
internal control over financial reporting that occurred during the registrant’s
most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably likely to materially
affect, the registrant’s internal control over financial reporting; and

5.

The registrant’s other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control over financial reporting,
to the registrant’s auditors and the audit committee of the registrant’s
board of directors (or persons performing the equivalent functions):

a)

all significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant’s ability to record, process, summarize
and report financial information; and

b)

any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrant’s internal control
over financial reporting.

Date: August 9, 2018

/s/ Paul McBarron

Paul McBarron

Chief Operating Officer, Chief Financial Officer

and Executive Vice President, Finance

(Principal Financial Officer)

EXHIBIT 32.1

Certification
of Principal Executive OfficerPursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Pursuant to 18 U.S.C. s 1350, as created
by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Cyclacel Pharmaceuticals, Inc. ( the “Company”)
hereby certifies, to such officer’s knowledge, that:

(i)

the Quarterly Report on Form10-Q of the Company for the three
months ended June 30, 2018 (the “Report”) fully complies with the requirements
of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange
Act of 1934, as amended; and

(ii)

the information contained in the Report fairly presents,
in all material respects, the financial condition and results of operations of the Company.

Date: August 9, 2018

/s/ Spiro Rombotis

Spiro Rombotis

President & Chief Executive Officer

EXHIBIT 32.2

Certification
of Principal Financial Officer

Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002

Pursuant to 18 U.S.C. s 1350, as created
by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Cyclacel Pharmaceuticals, Inc. ( the “Company”)
hereby certifies, to such officer’s knowledge, that:

(i)

the Quarterly Report on Form10-Q of the Company for the three
months ended June 30, 2018 (the “Report”) fully complies with the requirements
of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange
Act of 1934, as amended; and

(ii)

the information contained in the Report fairly presents,
in all material respects, the financial condition and results of operations of the Company.